DR. BOYCE: Should We Believe Simmons' Rant Against Banks?

Hip hop mogul Russell Simmons seems to feel that banks are not treating the poor in a proper fashion. This week, in a rant on his site, “The Global Grind,” Simmons had this to say:
“They trick customers into doing things that are not good for them through lack of transparency, and surprise them with new fees when they can least afford it. I’m learning an important lesson about ethics or lack of ethics in this industry. In fact, I’m fighting with a bank right now that doesn’t know what kind of ass whipping they are going to get when I expose them for the abusive practices and exuberant fees they are charging the poor. What they are doing is trying to double their already outrageously high fees in exchange for providing absolutely nothing to my customers.”
Simmons went on to try to create a “movement” by adding a call to action:

“Let’s start the biggest public discussion ever about how banks treat us and expose these banks for their unequal treatment and unconscionable conduct. The time is now.”

OK, I like Russell Simmons, so my goal is not to “lay into him.” We had a serious problem a few months ago when The New York Times seemed to feel that I was comparing Russell to a pimp. Yes, I made the pimp analogy, but not because I believe that Russell is necessarily pimping the black community. Instead, I was simply asking whether or not you are truly the hero you claim to be simply because you are offering a better deal than the predator who comes in front of you. A pimp can argue that he gave his “employees” a better life because their old pimp treated them so poorly.

To translate, Russell’s rant on banks may simply be a cloaked request for black America to find a better financial pimp, meaning him. Banks are hurting black folks, and everyone else, we know that. Russell Simmons’ words are accurately and correctly designed to take advantage of the fact that there is a tremendous populist outrage against banks, where many Americans from all walks of life have expressed anger toward the enormous fees charged by these entities.

The next step for Simmons, logically, is to explain to you that if you hate traditional banks, you should then switch over to (surprise!) The Rush Card. The problem for Russell, however, is that many predatory lending experts feel that Russell is one a small set of urban slum lords who use their recognition in urban America as an avenue to offer exploitative banking products. Another two are Montel Williams and Magic Johnson, who are endorsing pay-day loan and rent-to-own companies themselves.
I spoke with Predatory Lending expert Dr. Christopher Richardson about The Rush Card. I had my own perceptions, but I wanted to get his take. After reading through the terms of the contract for the Rush Card, Dr. Richardson said some things that I can’t quite repeat in this article. I agreed with him, to a point: although the Rush Card is not as bad as it could be, it certainly leaves a great deal to be desired.

One of the most interesting aspects of The Rush Card is the $1.00 “Convenience Fee,” charged after every purchase. While the company argues that the fee is capped at $10 dollars per month, it is still disturbing. What’s more interesting is that the company says that it will typically overcharge on the fee if you make more than 10 transactions, then refund the money to you the following month. This allows Russell’s company to bank that cash and earn interest off the money that should be in the hands of the consumer.

After the New York Times incident, Russell’s managers tried to call me to “explain” the benefits of The Rush Card to consumers. I felt that they were trying to convince me that their card was harmless, but they keep forgetting that I’ve taught Finance for the past 17 years. I wasn’t interested in speaking to business managers, and unfortunately for them, they would not speak to my business managers (I’m usually busy from sun up to sun down and just didn’t have the time). I told them that I’d talk to Russell, since I respect him and we have a few mutual friends. But of course, I’d never be the mogul that Russell Simmons is, nor would I ever want to be. Russell never called me back, so I can only write commentary based on what I know about Russell’s card. My goal is to simply tell the truth, since the people need to hear it.

At the end of the day, Russell Simmons might have a product that urban America can use. But his argument that “You should use my card because the overdraft fees at banks are too high,” is inappropriate. If someone wants to eliminate their overdraft fees from banks, they can simply tell the bank to do what The Rush Card does: Not honor any transaction that takes them over their account limit. How banks respond to bounced checks is not within the realm of what Simmons can discuss, since The Rush Card doesn’t offer check cashing services at all. Russell’s argument is that by using a card that doesn’t let you go over the limit or write checks, you will avoid the fees that come from being over the limit and writing checks. The problem is that some people enjoy having the convenience of writing checks or not being embarrassed if they make a transaction that exceeds their account limit. It’s like telling a chubby kid to starve himself in order to avoid gaining weight. Which is worse? Gaining weight or starving? It depends on who you ask, whether the kid enjoys eating and how overeating compares to the pain of starvation.

The bottom line is that we should all be alarmed when a multi-millionaire capitalist tries to start a revolution by pretending to “get gangsta” with banks. Russell Simmons can’t get too gangsta with banks, since he is technically just another banker (since he claims to be offering an alternative to banking services). Some may argue that he is a more benevolent banker than some, but he is certainly not the best option for the African American community. President Obama needs to step in and regulate all bankers (and those who compete with them) to keep them from exploiting African Americans, because right now, we are all stuck with finding the better pimp.